Siemens makes inroads with French in Alstom talks

Staff and Wire Reports

Published 12:42 am, Friday, May 16, 2014

The French government might have given Siemens reason to believe it would have a leg up in a possible purchase of Alstom's energy operations, but the German company could be having second thoughts as it considers its chances against suitor General Electric.

Fairfield-based GE offered $16.9 billion for the French conglomerate's energy unit last month, but the France has encouraged other bidders.

Following conversations this week with Siemens officials, Industry Minister Arnaud Montebourg said the talks have been productive, according to Bloomberg News, which reported that Montebourg published an decree Thursday that extends the protective arm of the state beyond defense to industrial areas covered by Alstom.

"There are talks with Siemens that are very constructive, which is not the case with GE," Montebourg said, according to the internal Siemens document, Bloomberg reported.

Noting that Siemens has not made an offer, the German company could be gauging the situation, said Nicholas Heymann, an analyst with William Blair.

Siemens CEO "Joe Kaeser recently announced the most extensive operational, cultural and portfolio overhaul in Siemens' history," Heymann said. "The acquisition of Alstom's energy business could significantly delay or even potentially jeopardize the company's ability to implement its new Vision 2020 program to restore Siemen's performance metrics to world-class levels."

In an April 28 report, Fitch Ratings warned that an asset swap with Alstom could put pressure on Siemens' "A" credit rating.

The French government, which in 2004 joined banks in bailout of Alstom, has criticized the GE bid, saying it is too low. GE has stuck by its offer and has said it is open to more talks.

Montebourg's comments serve to remind GE of France's sway ahead of a meeting Friday between government officials and its chief of power and water operations, Steve Bolze, Bloomberg reported.

Shares of GE fell 16 cents to $26.60 in New York on Thursday.

Kaeser has made at least three trips to Paris to meet with President Francois Hollande and Montebourg. Bloomberg News said that while due diligence work on Alstom is ongoing, Siemens is frustrated by the level of access to the books and management, according to two people familiar with the situation.

According to the internal Siemens document obtained by Bloomberg, the decree "clearly aims at curbing GE's zeal towards Alstom." The sale of energy businesses might require the approval of France's economy minister and the decree could also influence any transaction related to the rolling stocks and signaling activities, according to the document.